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Bank Chiefs Don’t Buoy Trading Hopes

Comments from BofA’s Brian Moynihan and J.P. Morgan’s James Dimon do little to lift hopes for a trading uptick in the second quarter

Bank of America Chief Executive Brian Moynihan, shown in January, indicated at a conference Wednesday that trading revenues for the second quarter were likely to be ‘flattish to down a little bit’ from last year.
Photo:
jean-christophe bott/European Pressphoto Agency

Banks aren’t likely to see earnings get a lift from rising trading tides this spring.

Speaking separately at a Bernstein Research conference Wednesday,
Brian Moynihan
and
James Dimon,
chiefs of
Bank of America Corp.
BAC 0.22%
and
J.P. Morgan Chase
JPM 0.17%
& Co., respectively, indicated that trading revenues for the second quarter were likely to come in near or slightly below where they did a year ago.

“I’d say flattish to down a little bit,” Mr. Moynihan said. He added that if trading revenue doesn’t improve down the road, further cuts in this business may be needed.

Such remarks seem to confirm earlier indications that the surge in trading that boosted bank earnings in the first quarter was an anomaly rather than a shift in the tides.

There is, of course, a good amount of seasonality to trading revenue, with the first quarter usually the strongest. Last year, trading revenues at bank holding companies were 13.1% lower in the second quarter compared with the first, according to the Office of the Comptroller of the Currency.

But the hope was that the higher levels of trading activity in the start of this year would set a foundation for better revenues through the rest of 2015. This then would mean that even after a seasonal decline, banks would report year-over-year trading-revenue growth.

With just five weeks or so left in the quarter, that hope is dimming. In what appears to be a replay of last year, fixed-income, currency and commodities trading has been hit the hardest, likely overwhelming the relatively stronger performance of equities trading.

There may be a silver lining: While it is clear that the big U.S. banks haven’t shaken the trading ebb tide that has dogged them since the summer of 2013, the decline doesn’t appear to be getting worse.